As the year comes to an end there are some things you may want to consider before 2021 arrives in just a few weeks. Increase your retirement savings. The maximum amounts allowed to 401k and IRA retirement plans remains unchanged for 2021 at $19,500 ($26,000 if over 50) and $6,000 ($7,000 if over 50) respectively. Consider saving as a percentage versus a dollar amount. Some 401k plans allow you to increase your percentage savings automatically every year. Replenish your emergency fund if necessary. Three to six months of living expenses is a good idea. If you found yourself using more during the pandemic, consider an emergency fund of six to nine months. Consider lowering your debt. Reducing and eliminating debt could mean making extra payments on your mortgage or vehicles. It may also necessitate refinancing your mortgage. With current rates as low as they are, it may be wise to […]
emergency fund
Is It Time to Rethink the Emergency Fund?
For the longest time in wealth management the recommended amount of money to have in an emergency fund has been three to six months of non-discretionary expenses (mortgage, rent, utilities, groceries). Typically, three months was the recommendation for a single individual or married couple with dual incomes. Six months was generally for married couples with one income earner. Every so often, something comes along challenging conventional wisdom, and that can be a good thing. In this case, it’s a pandemic that’s changing how we think – about many things. The pandemic has wreaked havoc on many lives. People have been laid off, lost jobs, are working less hours, losing income. Those with emergency funds have seen them dry up, and those that didn’t have them to begin with were worse off. For the future, it may be wise to consider a longer (more money) emergency fund. For example, we can […]
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What to do with an extra 1,000 dollars
I occasionally get this question – especially around the time of tax refunds. When someone comes up with an extra $1,000, they often want to know how to best use that money wisely to help out their overall financial condition. Of course this question has different answers for different situations. I’ll run through several different sets of conditions that a person might find him or herself in, and some suggestions for how you might use an extra $1,000 to best improve your financial standing. (It’s important to note that you don’t have to have an extra $1,000 lying around to use this advice – you could have an extra ten or twenty or fifty bucks a week and put it to work with the same principles.) The point is to find money that isn’t being spent on something critical, and put it to work for you! Even small steps amount to wonders. […]
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Safety with an Emergency Fund
Today’s message is about Safety – but not things like “don’t run with scissors” or “wait a half hour after eating to go swimming”. What we’re referring to is the old concept of having an emergency fund. The primary thing that you should take away from this Safety discussion is Peace Of Mind. An emergency fund is a vital component of your overall financial toolkit. You should have 3 to 6 months’ worth of expenses set aside in a liquid, stable account, such as a bank passbook savings account or a money market account. By “liquid” we mean that the funds are easily valued and withdrawn as necessary. By “stable”, we mean that the funds are not at risk due to market volatility, but also that there is some return in the form of interest to the account, however small.
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Financial Planning Pyramid: Foundations
You can’t build a house from the top down, right? Like most solid structures, they start with solid base, a firm foundation. Some of the biggest skyscrapers are started below ground level, well beyond what’s in our view when we look at the behemoths of structures. Can you imagine a skyscraper built on just a foundation of concrete? The first strong wind or tremor would send it toppling. The same process can be applied to financial planning. You have to have a solid base, a firm foundation before you can think about building a portfolio, estate planning, etc. Generally, the financial planning pyramid starts with the base known as risk management. This includes such risks as auto and home insurance, an emergency fund, life and disability insurance, and a will. Having this solid base protects you from many risks in life, but also protects your plan and your money that […]
Sterling Raskie, MSFS, CFP®, ChFC®
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